Mortgage applications index falls 0.3 percent

Rising interest rates put damper on refinancings

August 07, 2005|By BLOOMBERG NEWS

WASHINGTON - An index of mortgage applications fell as higher borrowing costs made it less profitable for homeowners to refinance. Home purchases increased.

The Mortgage Bankers Association's measure of applications fell 0.3 percent to 752.1 in the week ended July 29, from 754.3. The level was the lowest since the last week of May. The average rate on a 30-year fixed mortgage rose to 5.83 percent in the week, the highest since the middle of April.

The rise in interest rates, up in four of the last five weeks, pushed the group's gauge of refinancing down 3 percent to 2250.3, the lowest level in two months. The decrease removes a source of support for consumer spending and the economy.

"Business is slowing a little bit, coming off the super-heated times we had the last month and a half," said Bob Walters, chief economist at Quicken Loans in Livonia, Mich. "It's still strong, but not as strong as we've seen in the last few weeks as interest rates have come up a bit."

The share of applications for adjustable-rate mortgages fell to 28.5 percent, from 29.4 percent. The one-year adjustable-rate mortgage rose to 5.03 percent from 4.95 percent, while the average on a 15-year loan rose to 5.7 percent from 5.61 percent.

The group's index of applications to purchase homes rose 1.7 percent to 540 from 521.2 the previous week.

"The housing sector of the economy is still doing quite well," Anthony Chan, senior economist at JPMorgan Asset Management in Columbus, Ohio. "Over the next couple of months, it's very hard to see any weakness in any of the components that drive the housing market."

The refinancing gauge fell from 2320.3 in the prior week. The last time the level was so low was the week ended May 27, when it was 2142.1. The refinancing index is still higher than it was a year ago. The share of applications that were for refinancing fell to 41.7 percent, from 42.9 percent.

The Mortgage Bankers Association survey covers about half of all U.S. retail residential mortgage originations and has been conducted weekly since 1990.

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